The introduction of higher national insurance tax on employers poses “uncertainty” for future interest rate cuts, the governor of the Bank of England has warned.
Andrew Bailey told MPs on the Treasury select committee that inflation had fallen faster than expected recently, prompting the monetary policy committee (MPC) to cut interest rates for the second time this year earlier this month to 4.75 per cent.
However, he warned that the increase in employers’ national insurance contributions (NICs) announced in last month’s budget was “one of the biggest uncertainties ahead”.
If it raised the cost of employment and led to job cuts, it would soften the labour market and force the Bank to lower rates “gradually”, he said.
“There are different ways in which the increase